So what if the US credit rating is cut?

WASHINGTON, April 19, 2011 (AFP) – For the first time a top credit ratings agency has seriously hinted the United States might be forced to welch on its debts, a warning experts say could herald dramatic changes for the country and the world. In the world of credit a “AAA” rating is a gold star of approval. Those countries and businesses that have it can borrow extraordinarily cheaply, those who don’t, can’t.

So when ratings agency Standard & Poor’s on Monday warned the United States has a one-in-three chance of losing its gold star in the next two years, it came as a bit of a shock to the system.

The announcement was “like a gas explosion in a mine,” according to Gregori Volokhine, an analyst at Meeschaert Capital Markets.

The impact was immediately seen on stock, bond and currency markets, but the most profound impact may have been to make the unthinkable — a US downgrade — not only thinkable, but likely.

“If two years from now we have not done anything, and we’ve added another $2.5 trillion to the debt, it will no longer be a one in three chance,” said Steven Ricchiuto, chief economist at Mizuho Securities US.

“The probabilities of this are on an increasing scale,” he said, pointing blame directly at politicians

Search for:

About Us

LBO is the pioneer and leader in online business and economics news in Sri Lanka, LBO brings you a more comprehensive online news experience, integrating a host of interactive tools to keep you better informed.